UK Trends and Developments Contributed by: John Binns, BCL Solicitors LLP
By this time, the criteria for designations under the Russian regime had also been vastly expanded to include not just those actively involved in challenging Ukraine’s territorial integrity or sovereignty but also anyone involved in sectors of the Russian economy deemed economically or strategically significant. In terms of SAMLA’s Section 11, the (present or past) involvement in such sectors was deemed to be a “specified activity”, while the definition of “associ - ated” was later expanded to include, among others, close family members. Rationale and risks Any expectation that sanctions laws would define “specified activity” or “association” in a way that connoted moral blame or knowing involvement in the activity of the government that had been defined as problematic was arguably abandoned (at least in legal terms) in making these amendments. Rather than designating people who were themselves part of the problem (here, the invasion of Ukraine), Rus - sia’s sanctions were now aimed primarily at damaging the Russian economy, using those who were (or had been) involved in Russian business, and their family members, as a means to that end. The early examples of the Sanctions Designation Forms (SDFs) provided to DPs seemed to suggest that the FCDO believed that the assets of Russian “oli - garchs” – a term that appears to be broadly applied to anyone with significant business interests in Russia – were held at the request or under the direction of the Russian government. However, over time, the FCDO appeared to adopt a more relaxed stance, indicating that the primary goal of these designations was to cause economic harm to Russia, regardless of wheth - er the designated persons had any genuine influence over the Russian government. Despite this legal shift, the popular view and policy agenda towards Russia has remained influenced by a conflation of sanctions (as a means of tackling the actions of its government) with economic crime (which connotes a moral judgment about activities and/ or the derivation of property). Perhaps the starkest illustration of this lies in the combined AML/sanctions compliance functions of banks and other regulated businesses – which, since 2022 (if not before), have
reflexively treated any customer who does business or resides in Russia as “suspect”, and in many cases, Russian citizens as a class. Rightly or wrongly, Rus - sians’ money is often treated as “dirty” until proven otherwise. Challenges to designations For those who had thought that DPs would have a better prospect of challenging their designations at the High Court in London than at the EU courts in Lux - embourg, the two-stage process of ministerial reviews followed by court reviews under SAMLA (Sections 23 and 38 respectively) has been a disappointment. Gen - erally, the process of obtaining a DP’s SDF and await - ing a ministerial decision has been slow, and there has been a predictable tendency for the FCDO to adhere to its original decisions. Variations in the evidential basis for designations, while arguably demonstrating a principled approach to the process, have presented additional challenges and contributed to a sense of “moving goalposts”. Worse, the courts (now including the Supreme Court, in the challenge brought by Eugene Shvidler) have demonstrated extreme deference to the “institutional expertise” of the FCDO in matters relevant to the pro - portionality exercise, which has been assessed at an aggregate level rather than with reference to the indi - vidual circumstances of the DP concerned. Targeting trade While few, perhaps, have much sympathy for those labelled (rightly or not) as “oligarchs”, the scope of the Russia regulations has meanwhile expanded to affect the provision of goods and services to “persons con - nected with Russia” (PCWRs), which the regulations have defined to mean, broadly speaking, individuals residing there and companies incorporated or domi - ciled there. The trend is particularly pernicious in the context of professional services, where the chilling effect of sanc - tions effectively creates a hostile environment for an entire population, and a toxic (albeit understandable) reluctance among professionals to take the risk of (or to jump through the administrative hurdles involved in) continuing to work for them. These services, of
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